U.S. President Donald Trump has issued an executive order imposing a 25 per cent tariff on imported medium- and heavy-duty trucks effective November 1. However, vehicles traded under the Canada-U.S.-Mexico Agreement will be exempt from this tariff. In addition, Trump has extended relief to U.S. automakers by providing a rebate on auto parts tariffs until 2030. The rebate, set at 3.75 per cent of the sales price of domestically assembled vehicles, was calculated by applying a 25 per cent import tax on parts constituting 15 per cent of a vehicle’s sales price, resulting in a 3.7 per cent rebate. This rebate will also be extended to manufacturers of trucks and engines.
Trucks that comply with the CUSMA trade agreement will only face tariffs on non-American parts. The newly imposed tariffs will not affect auto parts compliant with the North American trade pact at present. A 10 per cent tariff will be applied to buses and motorcoaches. Trump had previously threatened these heavy truck levies as a measure to safeguard American industry from external competition.
Under Section 232 of the Trade Expansion Act of 1962, Trump utilized his authority to impose these new truck tariffs, extending the levies to semi-trailers and large pickup trucks, in addition to the tariffs already imposed on smaller vehicles earlier this year. This move adds to the existing sector-specific duties on steel, aluminum, copper, and lumber. The White House stated that these actions are aimed at strengthening America’s manufacturing capacity for medium- and heavy-duty trucks and crucial parts, essential for military readiness, emergency response capabilities, and economic infrastructure.
The American Trucking Association has expressed concerns about the impact of these tariffs, fearing potential price increases in an industry already grappling with steel and aluminum tariffs. The association highlighted the industry’s thin profit margins, years of freight recession, declining rates, and rising operational costs. They emphasized that heavy-duty truck imports do not pose a national security threat.
The North American auto industry operates in a deeply integrated manner, with many trucks already being manufactured in the U.S. using components sourced from various countries. While the repercussions of these tariffs are likely to be more significant in Mexico, some heavy- and medium-duty vehicle companies also have operations in Canada. For instance, Paccar, a producer of large commercial trucks, has divisions in Canada and had to lay off workers at its Ste-Therese, Quebec plant in August.